Any person responsible for paying to a non-resident, no being a company, or to a foreign company, any interest or any sum other than salary shall deduct TDS as per the provision or procedure is given below.
Please read the complete article to know the procedure to deduct TDS on payments to Non-residents and Foreign companies.
Person Responsible to deduct Tax
The payer and if the payer is a company, including the principal officer thereof, or the authorised dealer, as the case may be.
Exemption Limit: Nil.
Time of deduction of TDS
The tax shall be deducted either at the time of actual payment to Non-Residents and Foreign Company of such income or at the time of this credit to the account of the payee whichever is earlier.
Where interest/income is credited to any account, whether called interest account, suspense account or by any other name in the books of accounts of the person liable to pay such income, such crediting shall be deemed to be the credit of such income to the account of the payee.
Note: Amendment made by the Finance (No. 2) Act, 2014: Time period for deposit of tax deducted at source in case of payment to non-resident till due date return u/s 139(1) [SECTION 40 (a) (i)]
The time limit for deposit of TDS
Where tax is deducted by the office of the Government:
a) On the same day where the tax is paid without production of an income-tax challan; and
b) On or before seven days from the end of the month in which the deduction is made, where tax is paid accompanied by an income-tax challan.
In any other case,
a) On or before the 30th day of April where the income or amount is credited or paid in the month of March; and
b) In any other case, on or before seven days from the end of the month in which the deduction is made.
The time limit for issue of a certificate of TDS and Form
When TDS is deducted on the payment to Non-residents and Foreign companies, the deductor should issue form 16A within 15 days from the due date for submitting TDS return/statement.
The Form 16A should be issued quarterly on or before 15th August, 15th November, 15th February and 15th June.
The Form No.27Q should be submitted in case of payment to non-residents and foreign companies at TIN Center quarterly on or before
31st July, 31st October, 31st January for the first 3 quarters and 31st May for the last quarter.
Annual tax statement under section 203AA
In Form No. 26AS to be prepared and delivered by the Principal Director General or Director-General of Income Tax (Systems) or a person authorized by him to the deductee by 31st July following the financial year during which taxes were deducted or paid.
Surcharge & HEC
If recipient is Non Resident (Individual/HUF/AOP/BOI/Artificial Juridical Person)
How to Calculate = (TDS Rate + Surcharge + HEC)
|Rs.0 to Rs. 50 Lakh||–||4%|
|Rs.50 Lakh to Rs.1 Crore||10%||4%|
|Rs.1 Crore to Rs. 2 Crore||15%||4%|
|Rs.2 Crore to Rs. 5 Crore||25%||4%|
|Above Rs.5 Crore||37%||4%|
if the recipient is a Non-Resident Co-operative Society/Firm
|Rs.0 to Rs.1 Crore||–||4%|
|Above Rs.1 Crore||12%||4%|
if the recipient is a Domestic Company
|Rs.0 to Rs.1 Crore||–||4%|
|Rs.1 Crore to Rs.10 Crore||2%||4%|
|Above Rs.10 Crore||5%||4%|
Sec 206AA – If PAN is not furnished by the payee to the payer
- Actual Rate or 20% whichever is higher
Provisions: This section is not applicable in the following cases
- 192A – max rate 42.744 not 20%
- 194O 194Q – 5% not 20%
- As per rule 37BC
(a) Name, email-id, contact number, address in a foreign country, tax residency certificate issued by the foreign government and tax identification number issued by the foreign country.
if satisfies the conditions of rule 114AAB
Sec 206AB – Non-Filer of Income Tax Return
- Twice the actual rate or 5% whichever is higher
- other than section 192, 192A, 194B, 194BB, 194 IA, 194 IB, 194 LBC, 194M,
2 thoughts on “TDS on Payment to Non-Residents and Foreign Company [A.Y.2023-24]”
I have deducted 20.6(20+3%cess) on a payment made to a foreign airline with PAN. However, when I filed the same on 27Q under 195, there was a demand for short deduction at 30.9% (30+3%cess). Is there a mistake somewhere? Or is there any code that I should have filed it under 27Q that I missed? Please help!
My company gets tools from my parent company in the US. The invoices they give us are 1. for the cost of the materials and 2. for services in assembling the tool. Since the assembling is done in the US, do we have to deduct TDS on remittances to the parent company?